Credit score basics

July 31, 2009 by Todd Murray · 1 Comment 

The information in this post is courtesy of attorney Michelle Perrige Heine of Morris Law Group. Michelle has extensive experience helping people correct errors on their credit reports and improving their credit scores. Michelle can be reached at 952-832-2000. 

Your credit score is meant to predict credit worthiness and is intended as a predictor of whether or not you will become 90 days late on a loan obligation.  So how is your credit score calculated? Its usually made up of the following factors:

  • 35% is your payment history. Make sure you pay your bills on time.
  • 30% is the balances carried on your accounts as they relate to the total amount of credit available to you. The lower your balances are when compared to the total amount of credit available, the better.
  • 15% is the average length of time you’ve had the credit. For this reason, its best never to close old credit cards, even if the account has a zero balance.
  • 10% is the mixture of credit (ie. home loans, auto loans, etc.) you have on your credit report. 
  • 10% is the number of times a credit inquiry is made about you.

Credit scores are pulled for home loans, auto loans, and most other consumer installment loans. Credit scores can also affect your homeowners’ and auto insurance rates. Some employers and landlords also use credit scores in making decisions about applicants. High credit scores can save a person hundreds and even thousands in interest over the life of a loan.